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Thursday, April 21, 2011

LENDING NEWS: Government Orders 17 Lenders and Servicers to Reimburse Home Owners

WASHINGTON —The federal government on Wednesday ordered 17 of the nation’s largest mortgage lenders and servicers to reimburse home owners who were improperly foreclosed upon.

Government regulators also directed the financial firms to hire auditors to determine how many home owners could have avoided foreclosure in 2009 and 2010.

Citibank, Bank of America, JPMorgan Chase, and Wells Fargo, the nation’s four largest banks, were among the financial firms cited in the joint report by the Federal Reserve, Office of Thrift Supervision, and Office of the Comptroller of the Currency.

The Fed said it believed financial penalties were “appropriate” and that it planned to levy fines in the future. All three regulators said they would review the foreclosure audits. Under the agreements reached, the lenders and servicers have 45 days to hire an auditor and will “remediate all financial injury to borrowers caused by any errors, misrepresentations, or other deficiencies.” There is no minimum or maximum dollar amount identified.

In the four years since the housing bust, about 5 million homes have been foreclosed upon. About 2.4 million primary mortgages were in foreclosure at the end of last year. Another 2 million were 90 days or more past due, putting them at serious risk of foreclosure.

Critics, including Democratic lawmakers in Congress, say the order is too lenient on the lenders. House Democrats introduced legislation Wednesday that would require lenders to perform a series of steps, including an appeals process, before starting foreclosures.

“I want to know what abuses (the government agencies) identified, which banks committed them, and how their proposed consent agreement is going to fix these problems,” said Rep. Elijah Cummings, D-Md., the ranking member of the House Government and Oversight Committee. “Based on what I have read … I am not encouraged at all.”

Sen. Tim Johnson, D-S.D., chairman of the Senate Banking Committee, said the agreements struck were a “step towards addressing the improper and fraudulent practices to which many of the country’s largest mortgage servicers have admitted.”

Citigroup said in a statement that it had “self-identified” needed changes in 2009 and that it has helped more than 1.1 million home owners avoid foreclosure.

“We are committed to working with our regulators to further strengthen our programs in these areas and meeting these new requirements,” the company said.

Ally Financial, formerly known as GMAC, said it had not found “any instance where a home owner was foreclosed upon without being in significant default.”

Without specifically identifying instances of bad foreclosures, the government agencies noted in its report that the “deficiencies in foreclosure processing observed among these major servicers may have widespread consequences for the housing market and borrowers.”

John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer housing watchdog, said the government’s action is a year too late. It does little to help those who are just now wrestling with a foreclosure and those who have already been displaced, he said. Rather than moving swiftly to seize people’s homes, the banks should have done a better job helping people lower their mortgage payments through modification programs, he said.

“This should have happened a long time ago,” he said. “There are so many people who, if they had received a meaningful modification, could have stayed in their homes.”

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About Roberta

Roberta Stone works with Keller Williams Realty. This site is about Real Estate in the Boston Metropolitan Area and features news and information about a wide range of home ownership issues. Let's make this a dialogue about your housing needs.

I specialize in representing clients in the purchases and sales of single-family residences, condominiums, and multifamily properties in the Boston, Brookline, Newton and Cambridge markets; specifically the Boston neighborhoods of Jamaica Plain, Roslindale, South End, Back Bay and West Roxbury.
I have been a real estate professional since 1995 with a personal sales volume of over $200 million dollars and many industry awards, including the William Raveis President's Club for 2010, Chairman's Elite Club, for 2006 and 2007, top listing agent in my office 2009 & 2010, and the 2003, 2004 and 2005 at Prudential Real Estate. Known for innovative internet marketing; you will find that I have comprehensive tools for both buying and selling real estate.